Australia 'pocketing' Timor royalties

East Timor has accused Australia of pocketing hundreds of millions in disputed royalties while stalling negotiations on sharing the rich oil and gas resources of the Timor Sea.

Prime Minister Mari Alkatiri said Australia was improperly drawing huge royalties from continued production at the Laminaria-Corallina oilfield - located in the heart of an area claimed by East Timor under international law.

The field, operated by Woodside, BHP Billiton and Shell, lies closer to East Timor than the newly opened Bayu-Undan gasfield, where Australia has agreed to give the Timorese 90 per cent of royalties under an interim agreement.

Dr Alkatiri said the Federal Government had already drawn $US1.2 billion ($1.7 billion) in royalties from Laminaria-Corallina, which is producing 50,000 barrels a day and until recently was Australia's biggest oilfield. "If you apply current international law, I have no doubt that 100 per cent of Laminaria-Corallina should be ours," he told the Herald.

Dr Alkatiri, who has written to Prime Minister John Howard requesting suspension of oil production from the field, said East Timor would also seek to recover past royalties paid to Australia.

"It is our rights. As the elected Prime Minister of East Timor, the people expect me to defend their interests," he said.

Dr Alkatiri said Australian authorities were continuing to grant new exploration permits in the area, despite an agreement not to exploit Timor Sea resources where there were overlapping claims. He also accused Canberra of stalling negotiations on a permanent agreement on sharing the rich seabed resources of the region.

A preliminary round of talks was held last week, but negotiations are not due to start until next April. "It's too long," said Dr Alkatiri, whose government is looking to oil and gas royalties to develop one of Asia's poorest nations.

But a spokesman for Foreign Minister Alexander Downer said Australia was acting within its rights in the area and was committed to negotiating a long-term agreement which would be a "win-win" solution for both countries.

"East Timor is mis-stating international law. We are entitled to act in accordance with our view of international law, not East Timor's view," the spokesman said.

Dr Alkatiri said East Timor had been pressing its claims to Laminaria-Corallina and the smaller Buffalo field, operated by BHP, since the two countries agreed to begin negotiations.

"We've made it very clear, but Australia keeps exploiting the resources there, depleting the reserves, even though they have recognised there are overlapping claims," he said.

The Timorese have been angered by Australia's rejection of an equidistant maritime resources boundary. Canberra, which has refused to have the dispute adjudicated by the International Court of Justice, insists Australia's rights extend close to the Timorese coast because of the continental shelf.

"Australia has been exploiting all the resources of this region. What they have been doing is trying to convince themselves that they have been doing it with legitimacy. But don't try to convince us because we know quite well that it's not legitimate," Dr Alkatiri said.

But he said a fair and equitable agreement on resources sharing was needed and should be concluded quickly to ensure a "stable regime" for investors. "These two countries have to work together. We share the same ocean, the same regional interests and we have to work together."